For somebody who makes a living online, I’m decidedly low-tech. I just got a scanner for the first time a couple weeks ago, and I’ve been scanning and shredding all my paper documents like tax returns, health insurance statements, and so on.
The downside of scanning such private documents and storing them on your hard drive is that they’re not safe. If your computer dies unexpectedly–or, worse, if somebody steals it–you’ve got a problem.
Fortunately, there’s an easy (and free) solution. (Hat tips go to personal finance blogger Nickel and the members of the Bogleheads forum for their help.)
Dropbox
Dropbox is a free service that allows you to store files online. I’ve been using it for quite a while now, and I’m very happy with it.
When you install Dropbox, it creates a folder on your computer that looks and works just like any other. That folder, however, is linked to your Dropbox account. When you save something in that folder, it automatically saves it online as well. And if you’ve linked other computers to your Dropbox account, it automatically updates the version of that file that’s saved on those other computers.
The problem with using Dropbox to store files with sensitive information is that there’s no option to password-protect the Dropbox folder on your computer. If somebody stole your computer, anything in that folder would be immediately accessible to the thief.
Enter Truecrypt
Truecrypt is a free encryption program. It allows you to create a “volume,” which is essentially an encrypted (password-protected) folder for storing files you’d rather keep private.
To the naked eye, your Truecrypt volume doesn’t even look like a folder. It just looks like a file with no file type (which you’ve ideally named something very unimportant-sounding) that gives a rather unhelpful error message when somebody tries to open it.
But when opened via Truecrypt (and using the appropriate password), the volume opens and works just like any other folder on your computer.
Truecrypt + Dropbox = Happy Storing
So, by creating a Truecrypt volume that holds all your sensitive files, then saving that volume in your Dropbox folder, you’ve backed up your important files online while at the same time keeping them safe from malicious users.
A few final notes:
- Dropbox’s normally lightning-fast upload speed slows to a crawl on large transfers, so be prepared to wait patiently if your Truecrypt volume is a big one.
- Dropbox isn’t necessarily the only solution. I’m sure there are other online storage services that would work equally well–perhaps even better.
- Nor is Truecrypt the only solution. There are several high quality free encryption programs.
- Truecrypt isn’t exactly intuitive to use. Fortunately, the online user manual has a super step-by-step walk through.
- Be sure not to lose your Dropbox password or the password to your Truecrypt volume.
Hi. I'm Mike Piper, the author of this blog. I'm 
You missed one. See my post on SugarSync: http://theincidentaleconomist.com/wordpress/small-gifts/
Thanks for the tip. 🙂
For other readers: SugarSync appears to be very similar to DropBox, but its free plan includes more storage space than DropBox’s.
For windows users, Microsoft now has ‘Mesh’ which appears to have some very cool features. I have not experimented with it yet but I plan to very soon.
It has the ability to not just sync files among multiple computers, but also to sync your program settings. It also will allow you to remotely access any of your windows computers you want. All for free.
Just google ‘Windows Mesh’ to get more info. Microsoft has just included a release of it in their Windows Live Essentials.
Dropbox was introduced to me by my brother just recently. I was having problems with my external HD. I actually thought that I can never retrieve my files. Anyway, after I solved my problem I immediately tried Dropbox. I love it! I actually can’t believe that it’s free.
On my Linux system, I use encfs with the store in my Dropbox folder. I think it may be a bit faster than Truecrypt, but alas I don’t think it’s available for Windows.
Can someone tell me how secure our data is if our data is stored on dropbox servers? Wouldnt it be accessible to hackers or anyone who gains access to dropbox servers?
Good question. Here’s DropBox’s official answer: https://www.dropbox.com/help/27
For me, that concern is a part of the reason for my encrypting anything that I’d rather other people not see.
Hi Mike, I just stopped by to look for an investing link and this article is just what I was looking for (will be linked on Sat). Additionally, Vanguard is making some changes to the International fund that will add more international holdings and exposure. I think the changes are very positive!
Hi Barb.
Thanks for including the post. 🙂
And, I agree: The changes to Vanguard’s Total International Fund are decidedly positive.
Hi Mike, My last comment was in reference to the article of “What’s in my Portfolio.” I guess this is what happens when I try to do 2 things at once 🙂
I figured as much. I do the same thing sometimes. 🙂
What are the finances of dropbox? It’s free up to 2G, and pay plans start at $120/year. What is your usage so far? For <$100 I can buy a 1T external drive– every year– and store a complete backup where I put other critical paper documents like deeds. HD might go bad, Dropbox Inc. might lock their doors overnight. Risks in both.
Hi Greg.
That a great point about Dropbox potentially closing.
We also have an external hard drive, but I prefer to back things up online, because I assume any non-hardware-failure calamity–theft/fire/etc–affecting our computers would likely affect the external hard drive as well. (If we kept the external hard drive off-site, then that would be different. But we don’t really have a place to do that.)
That said, I certainly see a point in using a second service for extra reassurance–whether SugarSync as mentioned above by Austin, Amazon’s S3, or something else.
(My dropbox usage is well under 2gb actually, as I use it for nothing but excel files and pdfs, none of which are very big.)
If you want to minimize the sync times, you can split your stuff up into multiple archives. That way when you modify the one containing, say, your tax returns, you don’t have to re-upload the scans of your car titles, deed, or whatever, which is what would end up happening if you had everything crammed in a single archive. 🙂
Nickel: Good point. I hadn’t though of that. Thanks. 🙂
Dropbox is ideal for copying files from one pc to another, or to an iphone etc. For online backups, I’d recommend Mozy, just because it’s so easy to use and free for small amounts of data 2Gb I.e. The vital stuff. Encryption is built in.
http://Www.Mozy.com